The opinion of the court was delivered by: ROBERT GETTLEMAN, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Mor-Cor Packaging Products, Inc. ("Mor-Cor")
initiated the instant breach of contract suit against defendant
Innovative Packaging Corp. ("IPC") arising from defendant's
alleged failure to fulfill its obligations under the parties'
sales agreement. Defendant counterclaimed, alleging that
plaintiff had breached its obligations under the agreement.
Following a bench trial before Judge Andersen and judgment in
plaintiff's favor, defendant appealed to the Seventh Circuit (and
plaintiff cross-appealed a discovery matter relating to the
district court's refusal to award fees as a sanction for
defendant's refusal to admit a fact).

On appeal, Mor-Cor Packaging Products, Inc. v. Innovative
Packaging Corp., 328 F.3d 331 (7th Cir. 2003), the Seventh
Circuit affirmed the district court's denial of sanctions, but
remanded the case for further proceedings on the question of
whether plaintiff breached his contract with defendant.
Specifically, the court focused on the "cure" provision of the
parties' agreement, which required thirty days notice and an opportunity
to cure any breach of the contract prior to termination. The
Seventh Circuit noted that, although the district court clearly
thought that defendant violated the cure provision, the district
court did not clearly articulate whether plaintiff had also
breached certain provisions of the agreement, which would
necessarily impact plaintiff's recovery of damages. The court of
appeals remanded the instant case to this court for further
proceedings on the latter issue in particular.

The parties have agreed that this court should decide the issue
of defendant's liability on the record developed before Judge
Andersen through cross-motions for partial summary judgment. For
the reasons stated herein, the court grants plaintiff's motion
for summary judgment and denies defendant's motion.

Plaintiff Mor-Cor is in the business of acting as a sales
representative in the corrugated sheet paper industry. At all
relevant times, Martin Field was the president and sole employee
and shareholder for plaintiff. Defendant IPC manufactures and
distributes corrugated sheet paper. On or about July 3, 1997,
plaintiff and defendant entered into a Manufacturer-Agent
Agreement (the "Agreement"), under which plaintiff agreed to act
as defendant's exclusive sales representative to various
customers in the Metropolitan Chicago area (which were listed on
Exhibit A to the agreement).

The Agreement, which is governed by Wisconsin law, provides
that:

The Agent [plaintiff] agrees to act in the best
interest of the Company [defendant] in respect of its
duties as Company's exclusive sales representative in
the sale of Corrugated Sheets within the Territory and to use its best
efforts to promote the sale of such Corrugated
Sheets. In that regard, Agent agrees to abide by and
comply with all sales policies and operating
regulations of Company as issued from time to time to
all sales people of the Company and will not obligate
or contract on behalf of Company without first having
received authority to do so from an executive of
Company. Agent further agrees not to represent any
manufacturer of Corrugated Sheets in competition with
Company or to otherwise sell Corrugated Sheets within
the Territory. Agent will also assist in the
collection of past due accounts owed to the Company
from Customers located within the Territory.

Section 2.2.1 provides that the Agreement may be terminated "by
a party if the other party fails to perform any of its
obligations herein and such failure is not remedied by the other
party within thirty (30) days of the other party's receipts of a
written notice describing said failure." The Agreement further
states that it may be terminated by a party "without any delay or
other formality" if the other party has its assets (or a
substantial part thereof) levied upon or seized or managed by a
third party, or if the other party: (i) makes or seeks to make
any compromise, assignment or other arrangement with or for the
benefit of its creditors; (ii) files a petition in bankruptcy;
(iii) is adjudicated and declared bankrupt or is insolvent; (iv)
has a third party appointed to manage or distribute its assets or
to liquidate or wind up its business; (v) institutes or has
instituted against it proceedings under any bankruptcy,
liquidation, winding up or insolvency legislation; or (vi)
authorizes or acquiesces to any of the foregoing. The Agreement
also provided that defendant could terminate the Agreement
"without any delay or other formality" if Mr. Field was convicted
of an economic offense (such as fraud) or became incapacitated,
or if defendant was unable to meet its obligations "by reason of
force majeure" such as acts of God, fires, explosions, strikes,
lockouts, among other things.

On July 1, 1999, defendant sent a letter to plaintiff,
asserting that plaintiff had failed to perform its obligations
under the Agreement. Specifically, defendant's letter stated that
plaintiff: (1) had failed to devote its best efforts to promote the sale of
defendant's products; (2) failed to service the value-added
portion of the corrugated sheet market; (3) quoted prices and
discounts without defendant's authorization and in contravention
of prices given to plaintiff; (4) authorized non-payment of
freight charges by customers without defendant's permission; and
(5) failed to assist in the collection of past due accounts of
defendant's customers and quoted payment terms that were not
authorized by defendant.

In a letter dated July 7, 1999, plaintiff responded that it had
not breached the terms of the Agreement, and "[if] in any manner
Mor-Cor did fail to perform (which would have been completely
inadvertent), Mor-Cor assures you that it intends to continue to
fully perform and honor the Agreement." In a July 29, 1999, reply
letter, defendant reiterated its position that plaintiff had
breached the Agreement, and further stated that, as a result of
plaintiff's "unwillingness to perform," plaintiff "may anticipate
the Agreement will terminate at the expiration of the 30 days."

On August 9, 1999, plaintiff wrote to defendant, seeking
confirmation as to whether Mor-Cor had been terminated effective
July 1, 1999. On August 10, 1999, defendant sent a letter to
plaintiff, terminating the Agreement "effective immediately." In
addition to referencing the five grounds enumerated in
defendant's July 1, 1999, letter, defendant further stated:

Agent has failed to act in the best interests of
Company in respect of its duties as Company's
exclusive sales representative within the Territory,
by acquiring or attempting to acquire a business in
competition with Company's customers. Agent's
competitive activities are a violation of the
Agreement, and are damaging to Company.

At trial, John Lingle, defendant's president, testified that in
mid-July, he heard a rumor that Field was attempting to purchase
a corrugated sheet plant. In late July, Lingle contacted Field to ask him about the rumor, and Field basically responded,
"It is none of your business." During that conversation, Lingle
did not tell Field that he considered such a purchase to be a
breach of contract or conflict of interest.

Lingle further testified that during the first week of August,
one of his customers, John Carman, informed him that Field had
recruited one of Carman's employees to work for him at Jet Age
Container, a corrugated box company in the Chicago area,
confirming the rumor Lingle had heard. Lingle subsequently sent
the August 10, 1999, letter terminating the Agreement. Lingle
testified that, had the Jet Age incident never occurred,
defendant "certainly" would not have terminated the Agreement in
August.

Carman testified that, as far as he was concerned, Field
"couldn't be an effective salesman" for defendant because Jet Age
Container was one of Carman's competitors, and "we certainly
wouldn't want to deal with anybody that's  to help them in any
way  to get more competitive against us." He further explained
that he would not want competitors learning of special projects
that he was running for his customers, even though that
information was made available to sales representatives. Carman
also testified that, at the time he learned Field was trying to
recruit his employees, he was irritated, but that he does not
hold it against Field personally any more.

Two other witnesses, Christopher Woods and Bill Heymann, also
testified as to whether they would be concerned if they had
learned that Field or plaintiff acquired an interest in Jet Age.
Woods, Vice President of InnerPac, testified that such a
revelation would not have affected him continuing to use Mor-Cor
as his sales representative. He added, however, that if Field had
an ownership interest in, or was running, a company that competed
directly with InnerPac, it would not be alright for Field to continue as InnerPac's sales
representative. Heymann, President of United Container
Corporation, testified that Field's attempts to acquire Jet Age
Container would not bother him.

Field testified that his original intention, prior to the July
1, 1999, letter, was to purchase Jet Age Container for his son
and son-in-law, so that they could build equity in a business.
After receiving the July 1 letter, however, and believing that he
was about to be terminated, Field decided to become more involved
in Jet Age Container. Field testified that the Jet Age Container
deal had fallen apart as of the date of his August 10, 1999,
termination from IPC, but was resurrected shortly thereafter and
closed on October 4, 1999.*fn2 At trial, Field stated that
he was managing Jet Age and owned one percent of the company.

PROCEDURAL POSTURE

At the conclusion of trial, the district court heard additional
argument from the parties. During that exchange, the judge noted:

I do not believe that Innovative Packaging
Corporation terminated [the Agreement] in accordance
with the provisions of the contract. Clearly they did
not give Mor-Cor and Mr. Field 30 days  a written
notice and 30 days notice to explain or back off of
the Jet Age investment that he made. And basically,
based on the testimony, Innovative Packaging Corp.
had actually decided not to terminate him and Mor-Cor
because of the offenses set forth in their letter at
the beginning of July. . . .

I am not convinced that the parties would have had a
productive relationship beyond the three-year term
[of the Agreement]. It had already begun to
deteriorate and the plaintiff had already begun to
hedge his bets by initiating discussions to acquire a
company which was going to take substantial amount of
effort on his part, even if it wouldn't have eaten up
all of his efforts. We will never know if it would
have undermined his salesmanship so much that he
wouldn't have sold anything. But I think that your 
your son and son-in-law probably would have required
enough oversight at the beginning so that your sales wouldn't have been at the level that IPC demanded it.
But, once again, that is a [fact] we will never
know. . . .

The findings of fact and conclusions of law subsequently
submitted by the parties and adopted by the district court
provided that "IPC did not give MorCor an opportunity to remedy
the anticipated acquisition of Jet Age, as required by Paragraph
2.2.1 of the Agreement," and that IPC breached the Agreement by
terminating the Agreement on August 10, 1999. The conclusions of
law further stated that, "[T]his Court does not conclude based
upon the evidence presented that Mr. Field's proposed acquisition
of Jet-Age constituted a breach." The district court awarded,
inter alia, "$277,412.00 representing 17 months left on the
three-year term as of the date of the termination of Mor Cor
(July 1, 1999)."

On appeal, the Seventh Circuit stated that it was clear that
the district court thought that IPC had breached the cure
provision in Paragraph 2.2.1 of the Agreement, however:

a more important question, the answer to which we
cannot dig out of the district judge's oral
statements or terse written decision, is whether
Field's proposed acquisition of Jet Age was a breach
of his contract with IPC, because, if it was, then
Field has failed to prove substantial damages and
almost certainly was overcompensated.

On this latter point, the Court of Appeals noted that "the
evidence is in dispute, and the district judge's opinion, as we
have noted, is both internally inconsistent and inconsistent with
his oral findings. Further proceedings will be necessary in the
district court."

DISCUSSION

This court's reading of the Seventh Circuit opinion suggests
that the purpose of the remand in the instant case was to
determine whether plaintiff breached the Agreement by Field's
attempt to acquire Jet Age and the effect, if any, that such a
breach would have on its damages. The focus of the parties' motions for summary judgment, however,
is on whether defendant breached the Agreement by failing to
give thirty days notice and an opportunity to cure.

Defendant argues that, as a matter of "settled law," defendant
was not required to give thirty days notice-to-cure before
terminating the Agreement because plaintiff breached its
fiduciary duty to defendant. According to defendant, it would be
"repugnant to require IPC to retain as its agent one who has
breached his fiduciary duties of full disclosure and avoidance of
conflicts, even if the latter were arguably curable." Plaintiff
responds that the Seventh Circuit opinion clearly established
that Mor-Cor was entitled to notice and an opportunity to cure
and, alternatively, that a fact question exists as to whether any
fiduciary duty was in fact breached.

The appellate opinion neither explicitly affirmed nor reversed
the district court's judgment that defendant breached the cure
provision. See id. at 335 ("All that is clear . . . is that
the judge thought that IPC had violated the cure provision.
Whether or not he was correct about that, a more important
question . . . is whether Field's proposed acquisition of Jet Age
was a breach of his contract with IPC."). The Seventh Circuit did
conclude, however, that none of the exceptions to the 30-day
notice provision applied in the instant case. Id. at 333.

Moreover, aside from affirming the district court's denial of
sanctions, the bulk of the court of appeals' analysis was
directed to criticizing the district court's resolution of the
"central" fact question in the case: whether Field could fulfill
his obligation to use his best efforts to sell IPC's corrugated
sheets at the same time that he was managing a company that
competed with IPC's customers. Id. As the Seventh Circuit
explained, if the acquisition of Jet Age constituted a breach of
contract, plaintiff "has failed to prove substantial damages and
almost certainly was overcompensated. . . .*fn3 If he was deprived of just one
month's profits by IPC's breach, the award for lost profits would
plummet to $16,000." Id. at 335. Read as a whole, then, it
appears that the court of appeals was not disturbed by Judge
Andersen's finding that defendant breached the cure provision of
the Agreement.

Even if this court concluded that the court of appeals left
that question open, it would still agree with Judge Andersen that
defendant breached the cure provision. Lingle's testimony
established that the five reasons stated in the July 1, 1999,
letter were not the basis for plaintiff's termination, and that
defendant "certainly" would not have terminated the Agreement in
August if the Jet Age incident had never occurred. When Lingle
discussed Field's acquisition of another company, he never
indicated to Field that he thought that there was a conflict, or
that Field could not continue as a sales representative for IPC
if he acquired the other company.

Plaintiff was not put on notice that the Jet Age acquisition
was cause for termination until the August 10, 1999, termination
letter, which stated that "Agent has failed to act in the best
interests of Company in respect of its duties as Company's
exclusive sales representative within the Territory, by acquiring
or attempting to acquire a business in competition with Company's
customers." This clearly violated § 2.2.1 of the Agreement, which
provides for termination by a party "if the other party fails to
perform any of its obligations herein and such failure is not
remedied by the other party within thirty (30) days of the other
party's receipts of a written notice describing said failure."
Among other things, the Agreement required plaintiff to "act in
the best interest of the Company [IPC] in respect of its duties as
Company's exclusive sales representative in the sale of
Corrugated Sheets within the Territory and to use its best
efforts to promote the sale of such Corrugated Sheets." The plain
language of the August 10, 1999, letter indicates that defendant
thought that plaintiff's potential acquisition was a violation of
its obligation to act in the "best interest" of defendant. That
being the case, defendant was required by § 2.2.1 of the
Agreement to give thirty days notice and opportunity to cure.

Defendant's argument that plaintiff also breached its fiduciary
duty to defendant does not compel a contrary result. Assuming
arguendo that the testimony of Carman and Woods establishes a
breach of fiduciary duty, the fact remains that the Agreement
requires 30 days notice and an opportunity to cure when a party
seeks to terminate the Agreement because of the other party's
failure to meet its obligations under the Agreement. "Breach of
fiduciary duty" is not among the exceptions to that requirement.

The principal case relied upon by defendant, Union Miniere,
S.A. v. Parday Corp., 521 N.E.2d 700 (Ind.App. 1988), does not
persuade the court otherwise. In that case, the plaintiff and
defendant entered into an agreement under which the defendant was
to manage the plaintiff's mining business. The parties' agreement
required the defendant to act for plaintiff's benefit and use all
of its best efforts to maintain a certain level of coal
production. Id. at 702. The plaintiff terminated the agreement
immediately, without complying with the sixty day notice
provision, after the defendant and its employees "engaged in a
series of acts . . . which adversely affected [plaintiff's]
business." Id. Among other things, plaintiff alleged that
defendant's attorney "drafted and delivered correspondence to the
Indiana Department of Natural Resources arguing against the
renewal of [plaintiff's] mining permit." Id. at 703. The trial court in Miniere granted a motion for partial
summary judgment in favor of the agent, concluding that the
notice provision was unambiguous, notwithstanding a factual
dispute as to whether the agent breached its fiduciary duty.
Id. at 702. The appellate court, id. at 703, reversed,
however:

Although we agree with the trial court that the
language of the notice and cure provision clearly and
unambiguously required 60 days notice before
termination, we conclude that its application of
contract law was inappropriate in this case. . . .
When an agent has acted to undermine his principal's
business, the principal will not be forced to endure
the stated contractual period before discharging him.
To hold otherwise would afford the disloyal agent the
opportunity to continue rather than cure his
destructive effort. Such a result would be repugnant.

In reaching that conclusion, the appellate court noted,
"[Defendant's] alleged attempts to dissuade the Department of
Natural Resources from renewing Bicknell's mining permit are of a
nature not easily curable." Id. at 703, n. 4.

Section 409 of the Restatement (2d) of Agency, relied on by the
Union Miniere court, provides:

A principal is privileged to discharge before the
time fixed by the contract of employment an agent who
has committed such a violation of duty that his
conduct constitutes a material breach of contract or
who, without committing a violation of duty, fails to
perform or reasonably appears to be unable to perform
a material part of the promised service, because of
physical or mental disability.

Neither the plain text of Section 409, nor the illustrations
contained therein, addresses whether a "material breach" of
contract overrides a notice and cure provision. Rather, the plain
text of Section 409 provides only that a principal may discharge
an agent prior to the time fixed by the contract of employment
if, (1) the agent commits a violation of duty that constitutes a
material breach, or (2) the agent is unable to perform a material
part of the contract due to physical or mental disability. Significantly, although the
Agreement at issue in the instant dispute explicitly provides an
exception to the notice and cure provision in the event of
"incapacity" or "inability" of the agent, no such exception is
made for breach of fiduciary duty.

Under Wisconsin law, which was not at issue in the Union
Miniere case, it is not clear that a material breach necessarily
relieves a party of its obligations to comply with a contract's
notice and cure provision prior to termination. Cf. Mor-Cor,
328 F.3d at 336 ("There is a difference between believing that
your contract partner has committed a material breach and wanting
to terminate your contract with him because of it. Many, we
suspect most, material breaches are forgiven, either in the hope
that they will be cured or because self-help (as through
termination) or legal remedies would cost the victim of the
breach more than they were worth."); Process Research Corp. v.
Hyprotech Ltd., 2001 WL 34379470 (W.D.Wis. June 14, 2001)
("Because plaintiff did not provide defendant with written notice
of these alleged breaches and an opportunity to cure the alleged
deficiencies, plaintiff may not terminate the agreement for
substantial and material breaches.").

More importantly, unlike the breach in Union Miniere, the
alleged breach in the instant case appears to have been curable.
As plaintiff notes, had defendant brought the alleged breach to
plaintiff's attention, plaintiff could have: (1) explained to
defendant that the acquisition had fallen apart; (2) proceeded
with the acquisition through his children only, rather than
retaining an ownership and/or management interest for himself; or
(3) abandoned the acquisition entirely. Field's uncontradicted
testimony in fact established that he had resuscitated the deal
only after being terminated by defendant. The plain terms of the Agreement required defendant to give
thirty days notice and an opportunity to cure before terminating
the Agreement as a result of plaintiff's failure to act in
defendant's best interest. Defendant's belated attempt to recast
that breach as a breach of fiduciary duty does not, in this
court's judgment, permit defendant to circumvent that
requirement. Thus, the court grants plaintiff's motion for
summary judgment on liability.

CONCLUSION

For the reasons stated herein, the court grants plaintiff's
motion for partial summary judgment on liability on the breach of
contract claim and denies defendant's cross-motion for summary
judgment. The parties are directed to appear for a report on
status on August 12, 2004, at 9:00 a.m.

Our website includes the main text of the court's opinion but does not include the
docket number, case citation or footnotes. Upon purchase, docket numbers and/or
citations allow you to research a case further or to use a case in a legal proceeding.
Footnotes (if any) include details of the court's decision.

Buy This Entire Record For
$7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.